Urban poverty is a sign that a city is working because it means it is attracting people seeking economic opportunity, says Harvard economist Professor Edward Glaeser in his monumental work, Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier and Happier (2011). Glaeser is the leading thinker on urban affairs and he follows in the footsteps of Jane Jacobs who lectured everyone, including economists, for fundamentally failing to comprehend the role of cities in economic development and for not knowing the history of cities. Glaeser’s research extends Jacobs’ ideas and has transformed the entire study of urban economics.
Miracle Emerges After Communes Dismantled
Their thinking can easily be applied to China. If one were to summarize in one sentence why China took off economically in the past 30 years, I think it would have to be the introduction of more economic competition through less fettered markets under the leadership of the Chinese Communist Party. This closely relates to the effects of urbanization as elaborated in the following:
The commune system in the rural areas was dismantled. The agricultural population was permitted and willing to leave the villages. Many migrated to the urban centers to find work in factories producing labor intensive products. The rapid industrialization that took place finally allowed China to begin to transform its economic structure. The 220 million migrant workers who flocked to the urban centers obtained no subsidies from any level of government; they came simply in search of economic opportunities. Their freedom to exercise this choice after 1979 made China’s economic miracle possible – a freedom people had not possessed in the 30 years before 1979 because the Chinese government had tied them down to the agricultural communes.
The process of economic development is always very urban centered and driven. Successful economic cities are those that manage to attract economic migrants. When these migrants first come they are necessarily poor. If they were not then they would not have come in the first place.
If we roll back to the period 1945-50 in Hong Kong, we would have witnessed a similar phenomenon. Migrants flocked into the territory. Those who came were always more entrepreneurial, hardworking and motivated than those who stayed behind. Together these new immigrants would create Hong Kong’s post-war economic miracle.
Similarly, Shanghai was one of the most vibrant economic cities in Asia in the first half of the 20th Century and there were plenty of poor migrants who went there in search of economic opportunities. Most of the famous Shanghai entrepreneurs were not natives of the city. They were economic migrants who were attracted to the city from near and far. Many came from as far away as Guangdong province. For example, the founders of the four major department stores in Shanghai were natives of Heungshan County (today’s Zhongshan) in Guangdong.
Rigid Land Regulation Hinders Development
Urban poverty is not a sign of a failed city. The fact that a city attracts people in search of economic opportunities is a sign the city is working. The urban poor have better access to opportunities and services than those in rural areas. Cities are fundamentally places that bring people together and enable them to learn from each other. Cities are people, not structures. This emphasis on people is an important factor in urban regeneration. Struggling cities with skilled populations have a much better chance of becoming successful once again.
In contrast, Glaeser cited the example of Detroit, whose long history as an innovative automotive centre created a low-skilled population reliant on a single industry, making it difficult for the city to grow and adapt as New York City and Chicago had done.
Over-regulation of land use also hinders growth. One of the downsides of a successful city is that it becomes increasingly expensive to live there. Glaeser cites Mumbai as a city that has become unaffordable for the poor. The rigid land regulation makes it very difficult to start any new construction and thus housing becomes beyond the means of many residents. Less restrictive regulations on new building allow cities to grow, for example, by building taller structures to accommodate growing populations.
In a previous article entitled, “Why is Housing so Expensive?” HKEJ, 14 March 2011, I pointed out that land prices have been exceptionally high in Hong Kong ever since the Town Planning (Amendment) Bill of July 2004 came into effect. This is a seldom understood and hardly ever discussed reason for why Hong Kong housing has become unaffordable to the middle class. In another article entitled, “Public Sector Housing Policies for Hong Kong and Mainland China – A Proposal for Hong Kong?” HKEJ, 21 September 2011, I showed why rent control imposed in 1947 had stalled urban housing development. The waves of migrants that flocked to the city could not be adequately housed. It became eventually necessary to launch the public housing program in order to recover land that had been occupied without permission by squatters.
But coming back to the question of people, the kinds of immigrants who come to a city – and the policies that attract them – can make a difference in a city’s success. Glaeser cited Detroit and its low-skilled workers. Hong Kong today is also not attracting high quality immigrants, unlike in the past. Government policy has played a significant role in this.
Hong Kong’s success in the post-war era was the result of the efforts of immigrants from the Mainland (the expatriate population also played an important rolel). However, the Mainland immigrants who came in the 1940s and those who came when China opened up in the late 1970s arrived under very different circumstances.
Immigrants’ Different Profiles of Two Periods
First, in the 1940s the disparity in the standard of living between Hong Kong and the Mainland was quite limited. But by the late 1970s the gap had grown enormously. Second, in the 1940s and 1950s the provision of public welfare benefits in Hong Kong was quite minimal unlike those available in the late 1970s and afterwards. Third, immigrants who came in the 1940s often arrived with their entire families and would be net additions to the labor force. Those who came after the late 1970s were joining spouses from Hong Kong and bringing young dependant children. They were predominantly family dependants who did not add to the labor force.
Immigrants who arrived in the immediate post-war years brought talents, skills and manpower. They found economic opportunities and they did not have to depend on welfare benefits. They and their children became productively employed in Hong Kong’s labor intensive manufacturing sector in the 1960s. Those who came after the late 1970s, however, had limited skills of relevance to Hong Kong’s higher value added service economy. Many of them would not be able to find a job and could not afford to live in Hong Kong without public welfare or private charity support.
Fearing that too many people would be coming to free ride on welfare subsidies and handouts, Hong Kong sought to limit the annual inflow of immigrants by introducing highly stringent quotas from 1980. The lion’s share of the quotas was taken up by family reunion cases. In so doing Hong Kong ended up with a de facto immigration policy to bring in primarily family and welfare dependants. The quota numbers started at 75 a day in 1980 and were adjusted upwards to 150 per day by 1995; they have not been changed since. The effect of these quotas is to keep bona fide families separated for long periods of time, and to facilitate some Hong Kong individuals and Mainland officials to profit from arranged marriages of convenience.
The profile of the migrant population in Hong Kong has been transformed from economic migrants to welfare dependant migrants in the years since World War II. Let me hasten to add that while the recent welfare dependant migrants do not contribute immediately to Hong Kong’s economy, they do contribute to the family life of their spouses who are Hong Kong permanent residents. This is a benefit for Hong Kong people, notwithstanding the occasional reports of family tragedies due to difficulties in adjusting to a new life.
Population Policy Short-sighted
Many of the new migrants are a proximate cause of Hong Kong’s rising urban poverty. But this form of urban poverty is not a sign of a triumphant city in the sense described by Glaeser. It is a sign of failure due to the lack of vision in our government’s population and immigration policy. It fails for three reasons.
First, an immigration policy that supports family reunion is entirely proper. Who to marry is a basic human right of the people of Hong Kong. The government should not be standing in the way of an immediate reunion. Leaving families separated by a border will only increase the eventual social cost society has to pay after they are reunited. It is terribly shortsighted and our social welfare bureaucracies and organizations are only shooting themselves in the foot when they support this.
The government may blame public sentiment for its policy actions, but this will not exonerate it from its responsibility for failing to safeguard Hong Kong’s long term interest. Reuniting these families quickly holds the best promise for avoiding future family and social tragedies. It would make a huge difference to the city’s future benefit if Hong Kong were to invest in these new immigrants.
Second, Hong Kong aspires to be Asia’s world city. But Hong Kong’s present population and immigration policy is entirely at odds with such an aspiration. Given Hong Kong’s policy position to support family reunion, then we should be adopting a complementary policy to attract more talented and skilled immigrants to ensure the quality mix of Hong Kong’s population. We should also be preparing to accommodate the resulting larger population.
Successful cities today are no longer constrained by their official boundaries, but have expanded economically to embrace neighboring areas and to form a metropolitan area where a growing proportion of the people commute from surrounding communities to the urban core in increasingly integrated labor markets. A recent study by R L Forstall, R P Greene, and J B Pick (2009) ranks Hong Kong as 12th in the world among such metropolitan areas (see Table). The population of Hong Kong and its hinterland ranks behind Shanghai (10th) and ahead of Beijing (19th).
Table: Population Rank of Selected Metropolitan Areas
|
Rank
|
Metropolitan area
|
Population
|
Area (km2)
|
Population Density (People/km2) |
|
1 |
Tokyo |
32,450,000 |
8,014 |
4,049 |
|
2 |
Seoul |
20,550,000 |
5,076 |
4,048 |
|
4 |
New York |
19,750,000 |
17,884 |
1,104 |
|
9 |
Osaka-Kobe-Kyoto |
17,375,000 |
6,930 |
2,507 |
|
10 |
Shanghai |
16,650,000 |
5,177 |
3,216 |
|
12 |
Hong Kong |
15,800,000 |
3,051 |
5,179 |
|
13 |
Los Angeles |
15,250,000 |
10,780 |
1,415 |
|
18 |
London |
12,875,000 |
11,391 |
1,130 |
|
19 |
Beijing |
12,500,000 |
6,562 |
1,905 |
Enhance Human Quality
Hong Kong’s aspiration to be Asia’s world city has to be predicated on its successful metamorphosis into a vibrant metropolitan area, where an abundance of talented and skilled workers can be continuously drawn from outside its boundaries. Hong Kong is uniquely placed to attract these workers from the international community, but much less so from the Mainland where the largest talent pool is located. Our population strategy must have a pro-active immigration dimension to target the Mainland population. Without this, some of our deep contradictions will be exacerbated and our aspirations to be a world-class metropolis will not be fulfilled.
Third, the existing schemes are inadequate to address the potential of immigration from the Mainland. The immediate goal is to enlarge the daily quota so the backlog of family reunion cases can be cleared quickly. But, crucially, Hong Kong also needs to attract migrants with high levels of human capital attainment rather than simply financial wealth. Hong Kong has no lack of funds and does not need more financial capital. Existing schemes to attract human capital talent have been initiated by Hong Kong firms who recruit to fill vacancies, but this is too confining as a criterion. A successful immigration policy should be able to attract people who can quickly find jobs or create jobs after they arrive. Approval criteria should be developed and an application process should be established and directly managed.
For this to happen it is necessary to first initiate consultations in both Hong Kong and on the Mainland. The existing policy for the admission of university students should be more effectively implemented so that the present quota can be fully utilized rather than half so. Consultation with the Mainland would be more congenial if our attitude towards pregnant Mainland mothers was more relaxed and we allowed them to give birth in our private hospitals. If both parents of the child are not permanent Hong Kong residents, we could still give the child the right of abode, but without access to all major subsidized services such as education, health care, housing and so on.
Glaeser’s work on the triumphant city identifies the critical role cities play in the economic development process: as centers of innovation, sources of productivity and agents of change. If we were to implement a better immigration policy to enhance the population of Hong Kong not just in terms of quantity but of quality, we would take a giant step forward towards making the city Asia’s leading metropolis. We could reverse the progressively backward steps we have taken in recent years, during which our economic prospects have worsened and we have seen greater economic inequality, more welfare drive urban poverty, a failure to address the problem of an ageing and declining working population, and worse of all, the creation of further divisions among our people.
In a press interview Glaeser was asked to name his favorite cities in the world. He identified Barcelona, London and Hong Kong. I fully endorse his choice of Hong Kong – a city with enormous potential if only we could get our policies correct.
References
R.L. Forstall, R.P. Greene, and J.B. Pick, “Which are the Largest? Why Lists of Major Urban Areas vary so Greatly?” Tijdschrift voor Economische en Sociale Geografie 100, 277 (2009).
Edward G Glaeser, Triumph of the City How Our Greatest Invention Makes Us Richer, Smarter, Healthier, and Happier, Penguin Press, 2011
Hong Kong and Mainland Economic Integration Series (Part 3)
